Australian Government Extends Subsidies For Domestic Flights

The Australian Government will continue to subsidize domestic air travel until the end of September. The decision will ensure airlines keep flying key routes to cities and regional towns. Airlines have welcomed the weekend announcement.

The Australia Government will continue to underwrite some domestic flying for another three months. Photo: Brisbane Airport Corporation

“The measures announced today will help ensure Australian airlines and operators can maintain essential air services as we map out our economic recovery,” said Australia’s Minister for Infrastructure, Transport, and Regional Development, Michael McCormack in a statement seen by Simple Flying.

“We have kept the aviation sector going by funding minimum networks to get essential personnel and critical supplies to where they may be needed.”

Government subsidies aim to keep routes open

Threatened by a COVID-19 fuelled travel downturn, Australia’s domestic aviation industry ground to a near halt in March. In response, the Australian Government rolled out a raft of assistance packages for domestic airlines.

The subsidies aim to keep key trunk routes open. The Australian Government also wanted to keep air services going to regional and remote towns. To date, the assistance has proved effective at keeping many air services going, albeit on a reduced basis.

Australia’s domestic aviation threatened to ground to a halt earlier this year. Photo: Getty Images

The assistance included US$139 million targeted at regional airlines, allowing airlines like REX to keep flying. There were significantly larger packages aimed at keeping the bigger domestic carriers flying. In total, the Australian Government has tipped approximately $840 million into the aviation sector.

In response, Virgin Australia has operated approximately 76 return services a week around Australia. Qantas has been flying some 164 return services a week, now ramping up to around 300 return services a week.

Subsidies help keep Virgin Australia in the air

The initial assistance package was shortly due to expire. This was raising some concern about the ability of Virgin Australia to keep flying. The airline is in administration and said to be low on operating capital. With the Australian Government underwriting essential flights, that concern alleviates.

Unlike Virgin Australia, deep cash reserves give Qantas greater freedom. Australia’s number one carrier announced a raft of new domestic services last week.

Qantas has announced a raft of new flights. Photo: Getty Images

“We know there is a lot of pent up demand for air travel, and we are already seeing a big increase in customers booking and planning flights in the weeks and months ahead,” Qantas CEO Alan Joyce said last week.

“Normally, we plan our capacity months in advance, but in the current climate we need to be flexible to respond to changing restrictions and demand levels.”

Qantas powers ahead

Qantas’ flexibility is giving it a significant advantage over Virgin Australia as travel demand starts to rebound. The airline expects to be operating at around 15% of normal capacity by the end of June. By the end of July, Qantas aims to run at about 30% of normal capacity. The Australian Government will help underwrite a good number of those flights.

Meanwhile, cash-strapped Virgin Australia is operating at about 2.5% of its normal capacity and has announced no new flights in response to the extension of funding.

While Qantas gains ground, Virgin Australia continues to stagnate. Photo: Getty Images

While Virgin Australia continues to operate a single daily return service between Sydney and Melbourne, Qantas is now operating up to seven daily return services. Qantas is also significantly stepping up services in Australia’s southeast golden triangle as well as to many regional towns.

As Australia’s second airline stagnates, the country’s biggest carrier is starting to rev its engines again – a handy chunk of its expenses underwritten by the Australian Government for months to come.